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Ron Paul Wants To End the Federal Student Loan Program
On the heels of declaring his intent to axe a few departments from the federal government, Ron Paul has revealed more plans should he become President. The_THOMAS writes "Ron Paul wants to end Federal student loans stating that the Government involvement artificially inflates the cost of a college education and that once the government is out of the situation, students will be able to work their way to a college degree. What do you think?"
Because deregulating financial matters always ends well.
It's better to vote for what you want and not get it than to vote for what you don't want and get it.
- E. Debs
All of the sudden all the schools cost $60,000.
I love Ron Paul. He's the most idealistic person I've ever known. He's basically lying to everyone though. Most of the things he says go like this:
1. Cut funding
2. ??? Allow free market to do it's thing ???
3. Problem solved
He doesn't mention two crucial things. One is that step 2. may take a very long time. The other is that for 2 to happen effectively, we have to equalize any unfair and corruption-driven advantages that others have gained in a crooked system over two hundred years. Once highly paid yuppies get busted for illegally claiming "expenses" as tax free money and corporations get busted for gambling with pension funds at the same rate that people get busted for stealing a piece of bread or robbing a grocery store, then we'll have a truly fair environment for the free market to do its thing. In the meantime, Ron Paul is selling pipe dreams. Awesome pipe dreams, but ultimately dreams without good plans to back them up.
Which is a really good justification for him shutting the hell up when it comes to issues of welfare. I can't personally afford to work for free, in fact most Americans can't afford to do so either. We just don't have the money in the bank to allow for that. Perhaps if the GOP kleptocracy would stop looking for new and innovative ways of stealing from the poor to give to the rich, we might be able to afford to give back more.
At the end of the day, any politician that can afford to do that, whether or not they do, has no right to suggest that we cut back on our minimalist safety net.
The problem is that the federal student loans, while genuinely useful to some, have been exploited pretty much to death by the for-profit colleges. Those do powerful marketing and have pretty much established the idea that everyone should go to college, no matter what. It's the same with diamond jewelry: somehow a semi-rare rock is elevated to cult status, and every woman in the U.S. feels that getting a big one on a golden ring is cool and shit. The colleges merely took a good marketing lesson from DeBeers and applied it to a different market. The outcome is pretty much the same. Couples get into debt for shiny rocks. Students get into debt for college education that can be very well useless to them. Nothing new here, move along.
As much as I think some of RPs ideas are overreaching, I do believe that axing or at least reforming the federal loan program is a must. As an alternative to axing, I'd limit its availability to people who to non-profit schools. I'm sure a more extreme option exists, say limiting it to people who go to non-profit public schools.
A successful API design takes a mixture of software design and pedagogy.
On the other hand, why would employers be demanding a college education if they didn't see that it actually makes a significant difference in employee performance? They could hire people for less money if they didn't require a degree, so if less-educated employees could do the job, employers would be all over it.
The only reasonable conclusion, IMO, is that it does matter. Of course, it's entirely possible, perhaps even likely, that the education isn't so much the cause of good performance as the education and good job performance both result from the habits and character of the individual. By that I mean that the sort of industrious, intelligent person who will be a good employee is also the sort of person who will pursue and achieve a good education.
But I don't think so. My former employer, IBM, long had programs where they provided educational opportunities for factory workers so those people could advance within the company. I worked with a couple of gentlemen who had taken this route, starting on an assembly line, bolting computers together and ultimately achieving technical and managerial leadership positions in the company, getting the equivalent of a college education in the process. I noticed a couple of things about these people. The first was though they were given greater responsibilities at the same time they were getting their educations, those responsibilities were limited -- and even still they felt underqualified and somewhat overwhelmed by them. They, at least, felt that the education they received was essential in their ability to succeed.
The other was that I always felt they were less effective than they could have been if they'd had a "normal" college education. IBM didn't bother providing, or requiring, a liberal education curriculum and the result was people with deep knowledge and skill in a narrow focus. It was less problematic for the technical guy; he'd earned the equivalent of an MSCS, and within the context of software and hardware he knew his stuff -- but don't expect him to understand much about the social or historical context of his work. For the manager, he'd earned the equivalent of an MBA and again he knew business, negotiation and the economic theory of pricing, and again he lacked the broader education, but for him that lack really caused him to make some, IMO, poor decisions.
But the key point of my anecdotes is this: IBM is big enough and at one time had a large pool of low-skilled employees they could search for capable people to educate in job-specific skills and advance. And you know what? They more or less abandoned that approach. Partly because they shipped all manufacturing overseas and no longer had many unskilled positions from which to draw, but I think also because those trained-up people, however motivated, intelligent and hardworking, were actually less effective than their college-educated counterparts. Instead IBM disbanded its "IBM University" programs and shifted to the more common method of offering to subsidize a normal college education.
I'm convinced that they did this because they found that the sort of education offered by universities did a better job of preparing people to be effective technologists, businessmen and administrators.
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The average annual income for an individual with a high school diploma is $35k. For an individual with a bachelors degree, it is $50k.
Source: http://en.wikipedia.org/wiki/Household_income_in_the_United_States
For a married man in that tax bracket, the difference in income is taxed at 15%.
Source: http://en.wikipedia.org/wiki/Rate_schedule_(federal_income_tax)
The average annual cost of tuition at a public university in 2009 was $7020.
Source: http://en.wikipedia.org/wiki/Higher_education_in_the_United_States#Finances
Last year, 7.2 percent of those loans to public universities resulted in a default.
Assumptions: 4 years to complete a bachelors degree plus 1 year to start repayment and loans have a 3% APR and are dispersed in full at the start of the school year. Let's also say the government bears the full cost for all defaults, and the defaulter never pays a cent in taxes.
Subsidized Interest: $7020 * (1+2+3+4+4 years) * 0.03 = ~$3000
Marginal cost of default: $7020 * 4 * 0.072 = ~$2000
Marginal annual tax revenue from graduate: ($50k - 35k) * 0.015 * 0.928 = ~$2000
So, for a college student on a loan-driven ride through college, the total cost to the government is about $5000. That cost is recovered from said graduate within 3 years via increased income tax revenue. Since most workers will remain in the economy for another 30 years, this investment represents a 10:1 return on investment.
There are separate issues wrt private schools, MAP grants, etc. But this exercise almost always shows a substantial return on the investment. This isn't about poor lazy people. This raises people out of poverty, with a side dose of increased tax revenue and decreased welfare costs.
Only a fiscal lunatic would eliminate subsidized loans.
Ron Paul can be creditably accused of many things, but being an aristocrat isn't one of them. He paid for his education with military service, and retired from medical practice (OB/GYN) to go into politics. He is at least consistent in his principles, and as honest a man as you're going to find in politics.
How many 18 year olds do you know with good enough credit to buy a car, let alone a house?
How many private banks are going to be willing to fork over $20,000-200,000 for an education for an 18 year old kid with no credit history, no job, and a low likelihood of gaining employment in their first 5 years that will pay anything close to enough to be able to aford the payments on that loan?
The reason the federal student loan program exists is because it ISN'T profitable to make that loan. Most kids are going to default, and the banks will be left holding the bag.
The government program exists in a market where the private market doesn't want to go. That's a significant purpose of the government in a capitalist society.
-Rick
"Most people in the U.S. wouldn't know they live in a tyrannical state if it walked up and grabbed their junk." - MyFirs
Anytime a government subsidizes a product or service - the price will increase to match the subsidy. Period. The producers know how much the subsidy is(A), and how much a consumer can spend(B). They will always add a+b in the end because the elasticity of price can be known to support that level.
There isn't even an unknown pricing curve here - the University already knows your finances when you apply for financial aid. They can simply and easily price an education to target the population of students they want.
How many (fiscally) bankrupt universities have you seen lately? I only know of Huron University in South Dakota in 2005.
http://en.wikipedia.org/wiki/Category:Defunct_universities_and_colleges_in_the_United_States
I said no... but I missed and it came out yes.
You can preach personality responsibility all day long, but that doesn't change the fact that it's bad for society when we just let the vast majority fail. That's why prison populations are growing at outrageous rates. Why unemployment is skyrocketing. Why the United States is in decline.
What you consider 'very little money' is a whole lot to some people. And mentioning post-secondary options for high schoolers is just insulting. I wasn't able to attend post-secondary because I didn't have a car. All the kids who were in post-secondary classes when I was in high school were the ones with parents who could buy their education anyway. Also, a student has to be an above-average performer for post-secondary. How do you expect someone with uneducated parents to perform at that level in high school?
This attitude of, "it's your fault if you don't succeed, society has no business ensuring that you do" is the same attitude that has led to all the problems this country is facing. The college students who spend their time getting drunk and partying aren't the ones who cut their teeth just so they can attend. They're the rich fucks who have all their bills paid by mommy and daddy.
"From the depths of my skeptical and rationalist soul, I ask the Lord to protect me from California touchie-feeliedom."
So the answer is to cut off higher education at the knees and hope that eventually the market comes around before we enter a new dark age?
Maybe there is some other way we could go about doing this.
"In America, first you get the sugar, then you get the power, then you get the women..." -H. Simpson